And especially when it comes to newer, emerging, and therefore potentially risky technologies! Figuring out technology is a job for the CTO or CIO, right? After all, Chief Financial Officers have their hands full with reducing cost and risk, driving process and organizational optimization, increasing governance and transparency and providing business information to the decision makers.

Pundits agree, however, that the role of the CFO is changing. That CFO’s are being challenged to be a partner to the CEO, drive mergers and acquisitions and other strategic projects and generally step up to the role of “CEO in Waiting”. CFO’s must evolve the spectrum of their teams from accounting & controlling to optimizing business fundamentals. Routine tasks such as maintenance of the books are still essential. CFO’s, however, need find ways to establish more bandwidth for corporate and strategic tasks, and to add more dimensions to decision-making and strategy. They have to move embrace the needs of both internal and external stakeholders, and they need to move beyond a pure cost and profit perspective into a value creation perspective: providing insight 24/7 in a dynamic economy that has evolved beyond traditional limits of location, distance and time.

Well then! Isn’t this even more reason for the CFO to turn a blind eye to technology and focus on business transformation topics?

Recent studies, however, like IBM’s CFO Study done in 2006, 2007 and 2012 show that CFO’s and their teams are not making enough progress towards becoming a more strategic partner to the business and are still “stuck in transaction processing”, focusing on reporting and consolidation, process optimization and other back office tasks, only rarely stepping into the lime light when it’s time to report results. Not much has changed in the last 5 years.

What’s missing?

One of the key problems, among many others, that is keeping accounting departments “stuck in transaction and consolidation” is that decision makers are never happy with the timing and depth of their reports. Installed financials systems are often based on proprietary applications with independent data stores for preparing the balance sheet, income statement, profitability reports, liquidity forecasts, or KPIs for project leads and line managers. Data retrieved from these different applications often does not match up without additional explanation and reconciliation. Users are therefore often justifiably skeptical about whether they can trust the data. Furthermore, the reconciliation process can be extremely time-consuming and ties up valuable resources. A customer recently told us: ”We have an entire department just for reconciliation.“ Next generation financial systems need to deploy a single real-time data store for all reporting requirements – turning reconciliation into a “non-event”. The business architecture of the financials solution is therefore of decisive importance not only regarding the compliance-relevant topic of reconciliation but also, for example, regarding the scope and quality of the business content delivered by the solution.

So what’s the answer?

Maybe it’s time to challenge some of the assumptions and established processes. Maybe CFO’s should look towards new technology and new software to accelerate progress and transform their business even faster? After all, in the areas of Customer Relationship Management and Human Resource Management, cloud-based software solutions have been making rapid inroads into large enterprises:

Delivering faster time to value,

Eliminating up-front capital cost for systems,

Providing a predictable service subscription model,

Reducing or even eliminating in-house infrastructure and IT cost and staff requirements, and

Generally providing a more agile, business-user centric interface that requires a minimum of learning.

“Ok, OK”, you might be thinking, “CRM and HR are one thing, but core financials are another ball park altogether!”

Understood. This is a new and evolving area and deserves a closer look. Here are some of the benefits of a cloud-based financials solution when it comes to empowering the CFO for business transformation. The benefits of such solutions come in three main flavors.

Transformation

Agility

Collaboration

Let’s drill down into these areas into a bit more detail.

Transformation

Cloud-based financial solutions can more easily tap into and deliver the latest technology innovations since the customer does not have to set up the technological infrastructure or manage the systems by themselves any longer. This enables CFO to unlock more business value faster for all employees without having to go through cumbersome technology upgrade cycles. These systems, of course, cannot just rest on the laurels of new technology. They still need to provide the best practices, scalability, deep process controls, automated workflows, strictest governance, security, compliance and globalization-readiness CFO’s have come to expect from their existing enterprise financials solutions. A sound balance between the technical wizardry of cloud, in-memory, mobile and collaboration tools and sound financial expertise, as well as availability of a strong ecosystem of partners and system experts should become a key selection criterion for picking the right cloud financials package. Another key benefit of cloud financials is that these new solutions can be designed from the ground up with the business user – not just financials experts – in mind.

Allowing the business an up-to-date view of their financial state, any time, without having to wait for batch runs.

With the right solution, this ability to deliver relevant, personalized business information in real real-time, founded on a single-source of truth for financial analytics can become the key driver for faster business transformation for the CFO.

Agility

Cloud-based financial solutions carry the cloud “genome” by design. They are built for faster adoption, are easier to learn, and are much easier to adapt to specific business requirements than previous systems. The configuration of financial process controls, employee access permissions and prepackaged financial reports should be doable with a few clicks. The software can be quickly personalized, by the end users themselves. And the software is kept up to date automatically, allowing customers to consume new capabilities much more rapidly. This is a key benefit for any CFO looking to minimize their exposure to aging or obsolescent technology in their IT infrastructure. There simply won’t be any technology to go obsolete, since the data centers is run by the cloud provider leveraging experience, economy of scale and innovation speed for agility.

Agility, however, is not just a technical aspect. It also relates to the agility of the whole organization to sense and respond to changes in the business. And it relates to the agility of the CFO to set up and roll out organization wide information packages or new rules and processes. Since the software is running in a secure cloud data center, access to the corporate financial processes can be more easily achieved from any location, and from a wide variety of devices. The utilization of modern in-memory data base technology largely removes the need to establish separate data warehouses for reporting. And information consumers do no longer have to wait for end of period consolidation and reporting runs to have an accurate view of their business. As these systems mature, the agility also relates to the ability to go beyond real-time insight into forward looking financials, thereby improving forecasting and risk management capabilities.

Collaboration

The third aspect of cloud-based financial solutions is anchored around the topic of collaboration: Collaboration between people, between departments, between businesses, industries or market communities. Cloud-based systems are born and live on the internet, inheriting the open standards, global distribution and rapid innovation cycles driven by millions of people using internet systems and infrastructure online. To achieve business transformation for the 21st century “glocal hyper-speed” age, businesses need to learn to operate with internet speed, flexibility and openness. This is why cloud-based financial systems can form a new “backbone”, a new financials engine for the financial information supply chain. Engines that can connect information, people, processes and rules into transaction teams and open collaboration groups. Specifically, these new financial systems need to allow business users not just to consume real time information from any device, but also take instant action on the information. Action in the form of tagging the information and sending it on to the right expert. Action in the form of instantly forming collaboration teams of experts to enrich the information. Or action in the form of affecting and adjusting the core processes that generate the information.

Poetically speaking, it was once said by John Donne:

“No man is an Island, entire of itself; every man is a piece of the Continent, a part of the main”.

The same can be said of every employee, every department, business unit, corporation or industry. Collaboration is “baked into” the new cloud-based financials, and can therefore help CFO’s in their quest for business transformation.

Some of you might say at this point:

“Chris, this is all fine and dandy, and it sounds all very technical, but where is the real relevance to the job of the CFO, or the financial department in general?”

Let me try to give you some food for thought on where this fits in.

If you simply type “CFO of the Future” or “Role of CFO” into a Google search, and just read a few of the dozens of documents that popup, you will quickly see a number of key trends emerging:

The CFO of the future will be asked to:

Optimize the business, but become a strategic advisor at the same time

Continue to be the steward of all corporate assets but act as “CEO in Waiting”

Deliver value-add to the business in a proactive fashion

Drive business transformation by supporting the new dynamics of the economy

Drive organizational change and leadership by supporting the new agile style of work

Deliver real-time, or even forward looking financials, not just reporting and consolidation

I hope you agree that – if the above predictions are true – the financial departments and CFO’s of most companies need a new approach to achieve the above objectives. An approach that delivers the business architecture for this business transformation. An approach that brings together technology and financial expertise into a single solution. Once this approach is deployed, I believe any enterprise can lay the foundation for this transformation. A transformation driven by the potential of instant availability of relevant information to every business user in the company. Information based on real-time, reliable data and analytics that reflect the nature and state of the business. A transformation driven by the ability of the users to instantly act upon such information. And driven by the ability to establish and drive collaboration between people and systems with unprecedented ease.

Sounds too good to be true? Heard it all before, but did not happen?

I fully understand such skepticism. After all, we are talking about transforming core financial systems here! But I am not talking about a rip-and-replace approach. I am talking about a gradual, managed transition that deploys these new technologies in areas where they make most sense. Fast moving business units. Mergers. Acquisitions. Joint-Ventures. Subsidiaries. Consolidations of fragmented ledger landscapes. Global Rollouts. Or, for medium sized businesses, the full replacement of an aging system after a proper due-diligence procedure.

There are endless possibilities, and they should be explored to take advantage of the rapid development of cloud technology for the area of financial management.

I’d like to close here. I hope I have given you a bit of a perspective why the CFO should give the CIO/CTO a call, sit down for a cup of tea or coffee and talk about modern cloud-based financials solutions. What is available now is just a glimpse of things to come and I look forward to the journey ahead.

I tried to stay vendor neutral in this blog post, because it’s intended to speak about a real transformation here. A real transformation cannot be achieved by one vendor alone, and it’s not just about the products, but also about the ecosystem behind it, the experience and knowledge base to back it up, the global presence, ability to deliver etc.

So, since you started making it vendor specific …

If you get a hypothetical call from your CFO about cloud financials, what you should tell him or her is to get the FULL information about the options on the market. The list of vendors is certainly longer than the one you provided ;=)

If you’re at SAPPHIRE NOW Madrid next week, stop by for a chat, so we can go into more detail of what SAP has in this space

thank you for your long post and i don’t see a reason why i should not follow your advice. i understand that you may want to shy away from direct comparisons with competition, but for many of us in the field this is the first decision point we are facing. as you have rightly noted the list is much longer depending on the size, industry, or even what the last company the CFO was at. we both know they are a very conservative bunch and not keen on what’s the latest in IT.

i’m also glad that you brought up the ecosystem. the one i’m operating in is full of ecc and business objects and very few ByD experts. i think it starts with the tools at ecosystem’s disposal to help them in their daily trade. while we have access to all kinds of ecc, bo, or hana test systems or they are simply in our or our clients landscapes, i haven’t seen anything coming out from ByD. i haven’t checked recently, but NetSuite used to provide some kind of limited time access and Workday will as well if they haven’t done it not already.

why not show some leadership and provide a cloud access, especially for those who are not on premise?

Hi Greg, nice to meet you, and thanks for providing feedback. Since this is the Business Trends forum, I suggest we carry this discussion forward to the product specific set of blogs I am running in the Cloud Segment. I hope this is okay? That way we can continue this dialogue and keep this thread more high level, at the business transformation level for the CFO. Link attachedhttp://scn.sap.com/community/cloud/blog/2012/11/07/sap-financials-ondemand-key-innovations

I am happy to keep the flow around things we need to do better in the cloud space